MARKET CLOSE: NZ shares fall as global mood sours further, Air NZ, Sky TV and Xero drop

Friday 12th February 2016

New Zealand shares fell as global sentiment weakened, with Air New Zealand, Sky Network Television and Xero down.

The S&P/NZX 50 Index dropped 53.05 points, or 0.9 percent, to 5,933.97. Within the index, 41 stocks fell, eight rose and one was unchanged. Turnover was $124 million.

"A small number of people just want to get out, and there's no one at home on the buy side," said Matthew Goodson, managing director at Salt Funds Management. "Up and down the market, volumes are very light, so that is perhaps a ray of hope if something was to change in the negative sentiments wafting here this afternoon."

Air New Zealand led the index lower, dropping 5.9 percent to $2.695. That's a three-month low for the stock, which rallied pre-Christmas to peak in late January with oil prices plummeting. The airlines's annual earnings are due on Feb. 25 and its stock rating was downgraded from outperform to neutral by broking firm Forsyth Barr today.

"Air New Zealand is making amazing money at the moment, but the nature of the market is it probes to see where that cycle might end," Goodson said. "There's a couple of concerns there, one of which is the new entry from international airlines and the other is some headlines today that OPEC might be able to get together and do a deal on oil prices."

Sky Network Television fell 3.9 percent to $4.23, while Xero dropped 3.6 percent to $13.50, and Z Energy dropped 3.3 percent to $5.85.

The local market has fallen 3.6 percent since Monday, in a week where global markets slid amidst mounting concerns about European banks, oil prices and a slowdown in China.

Overnight, Wall Street dropped after the US Federal Reserve president Janet Yellen said there was a chance of US recession and the central bank was studying whether negative interest rates would help, should conditions worsen. Asian markets traded lower this afternoon, with Japan's Nikkei 225 down 4.1 percent, Australia's S&P/ASX 200 falling 1.1 percent, and Hong Kong's Hang Seng dropping 0.5 percent.

"There's obviously a series of worries out there, perhaps the biggest of which is that, aside from China, central banks are pushing around the end of a piece of string and then enter negative interest rates," Goodson said. "What we're seeing in this current sell off is a loss of faith in risk markets and central banks and their ability to keep bailing markets out, if you like. You've driven risk-free rates even lower, but the risk premium investors demand has gone up."

Nuplex Industries shed 3.3 percent to $3.86, Chorus dropped 3 percent to $3.62, and Fonterra Shareholder's Fund declined 2.8 percent to $5.50.

Port of Tauranga fell 2.7 percent to $18.10, Freightways dropped 2.6 percent to $6.10, and Summerset Group lost 2.5 percent to $3.85.

On the positive side of the market, Mighty River Power advanced 2.4 percent to $2.64.

Spark New Zealand rose 2.2 percent to $3.29. Spark's Revera unit is to supply the Inland Revenue Department's data centre services for the new tax system being developed under its business transformation programme. The 10-year deal is worth between $45 million and $60 million.

Outside the benchmark index, Michael Hill International advanced 2.1 percent to 97 cents. The listed jewellery retailer increased first-half profit 5.1 percent as it improved its performance in its key Australian market and boosted margins in New Zealand and Canada.

Australian vacuum cleaner firm Godfreys Group has bought New Zealand commercial cleaning firm The Service Company (TSC) for $2.7 million as it seeks to build up the business in a highly fragmented market. The company's ASX-listed shares rose 6.1 percent to A$1.21, and have dropped 34 percent this year.

BusinessDesk.co.nz

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